When you pick the best income stocks, or ETFs that hold them, you are, for the most part, investing in the safest and most secure companies. That’s in large part because of the dividends that the best income stocks pay. Dividends, after all, are much more stable than earnings projections. What’s more, dividends are impossible to fake; either the company has the cash to pay dividends, or it doesn’t.
Meanwhile, this ETF offers a compelling blend of tax-efficient dividend income and capital appreciation potential.
ISHARES CANADIAN SELECT DIVIDEND INDEX ETF (Toronto symbol XDV; buy or sell through brokers; ca.ishares.com) holds 30 of the highest-yield Canadian stocks. The ETF also considers dividend growth and payout ratios to make its selections.
The weight of any one stock is limited to 10% of the fund’s assets. Its MER is 0.55%. The ETF, which began trading on September 28, 1999, yields a high 3.6%.
Most market indexes are set up for investors so that the stocks in the index are those with the highest market capitalization and are also the most widely traded. However, the iShares Canadian Select Dividend Index ETF focuses on the 30 stocks that it sees as having the highest dividend yields; it also considers their prospects for dividend growth and the sustainability of their dividend payouts.
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iShare’s active management aims to select the top dividend-paying stocks
This ETF is more actively managed than the largest TSX ETF: iShares S&P/TSX 60 Index ETF. As a result, it charges a higher MER.
The fund’s top holdings are Canadian Tire at 7.8%; Royal Bank, 7.5%; Bank of Montreal, 7.3%; National Bank, 6.1%; TD Bank, 5.8%; Bank of Nova Scotia, 5.6%; CIBC, 5.3%; and TC Energy, 3.5%.
Recommendation in Canadian Wealth Advisor: iShares Canadian Select Dividend Index ETF is a buy.
